DAN RIVER INC /GA/ - 10-Q Quarterly Report

Back to GetFilings.com

1

- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________

Form 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2004
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to _____________

Commission file number 1-13421

DAN RIVER INC.
(Exact name of registrant as specified in its charter)

GEORGIA 58-1854637
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2291 Memorial Drive 24541
Danville, Virginia (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (434) 799-7000

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes / / No /x/

As of April 3, 2004, the registrant had 20,931,520 and 1,596,089 shares of
Class A Common Stock and Class B Common Stock outstanding, respectively.

- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

See Following Pages.

3

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
CONDENSED CONSOLIDATED BALANCE SHEETS

April 3, January 3,
2004 2004
------------ ------------

(in thousands, except share
and per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 3,562 $ 1,630
Accounts receivable, net 61,145 50,111
Inventories 144,270 148,248
Assets held for sale 9,569 9,796
Prepaid expenses and other current assets 10,347 8,417
Deferred income taxes 7,577 8,993
------------ -----------
Total current assets 236,470 227,195

Property, plant and equipment 444,093 443,230
Less accumulated depreciation and amortization (263,770) (256,139)
------------ -----------
Net property, plant and equipment 180,323 187,091

Other assets 13,583 18,180
------------ -----------
$ 430,376 $ 432,466
============ ===========

4

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes.

5
DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.

6
DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.

7

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Chapter 11 Filing

On March 31, 2004 (the "Petition Date"), Dan River Inc. and its domestic
subsidiaries (the "Debtors") filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the Northern District of Georgia. Since that date,
the Debtors have been operating their businesses as debtors-in-
possession pursuant to the Bankruptcy Code.

In fiscal 2003, the Debtors experienced a significant decrease in sales
beginning in the second quarter. During the second, third and fourth
quarters of fiscal 2003, in response to the decrease in sales, the
Debtors initiated plans to reduce costs through the closure and
consolidation of manufacturing facilities and a reduction of workforce.
Most of the benefits from these cost-cutting efforts were not expected
to be realized until fiscal 2004.

As a result of the Debtors' financial performance, they failed to meet
the maximum leverage ratio covenant contained under the senior credit
facility for the third quarter of fiscal 2003. Subsequent to the end of
the quarter, the Debtors and their lenders entered into an amendment of
the senior credit facility that waived the covenant violation and
imposed additional financial covenants. An additional amendment and
waiver to the senior credit facility was executed in December 2003, and
in January 2004 another amendment was executed, which temporarily
modified the minimum levels of excess availability permitted under the
senior credit facility.

The Debtors' sales and profitability did not improve sufficiently to
permit compliance with all of the financial covenants under the senior
credit facility, and as a result, the Debtors expected that they would
be in default commencing April 1, 2004. The Debtors concluded, after
consultation with their advisors, that their interests and the interests
of their creditors and employees would be best served by reorganization
under Chapter 11 of the Bankruptcy Code.

In conjunction with the commencement of the Chapter 11 cases, the
Debtors sought and obtained several orders from the Bankruptcy Court
which were intended to enable the Debtors to operate to the extent
possible in the normal course of business during the Chapter 11 process.
The most significant of these orders:

. permit the Debtors to operate their consolidated cash management system
during the Chapter 11 cases in substantially the same manner as it was
operated prior to the commencement of the Chapter 11 cases,
8

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

. authorize payment of certain pre-petition employee salaries, wages, and
benefits and reimbursement of pre-petition employee business expenses,

. authorize payment of pre-petition sales, payroll, and use taxes owed by
the Debtors,

. authorize payment of certain pre-petition obligations to customers and
certain customs brokers, common carriers and warehousemen, and

. authorize payment of certain pre-petition obligations to critical
vendors to aid the Debtors in maintaining operation of their business.

On April 1, 2004, the Bankruptcy Court granted interim approval for the
Debtors to enter into a $145.0 million debtor-in-possession financing
facility (the "DIP Facility") with Deutsche Bank Trust Company Americas as
agent for a syndicate of financial institutions comprised of certain of the
Company's pre-petition senior secured lenders. Pursuant to interim orders
entered by the Bankruptcy Court, up to $75 million of the DIP Facility is
available during the interim period, which ends on May 28, 2004. See Note 5
for a further discussion regarding the DIP Facility.

Chapter 11 is the principal business reorganization chapter of the Bankruptcy
Code. Under Chapter 11, a debtor is authorized to continue to operate its
business in the ordinary course and to reorganize its business for the
benefit of its creditors. A debtor-in-possession under Chapter 11 may not
engage in transactions outside of the ordinary course of business without the
approval of the Bankruptcy Court, after notice and an opportunity for a
hearing.

Pursuant to the Bankruptcy Code, pre-petition obligations of the Debtors,
including obligations under debt instruments, generally may not be enforced
against the Debtors. In addition, any actions to collect pre-petition
indebtedness are automatically stayed unless the stay is lifted by the
Bankruptcy Court. While under bankruptcy protection, the Debtors do not
expect to pay the interest obligations on the 12 3/4% senior notes due 2009
unless ordered to do so by the Bankruptcy Court.

9

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As debtors-in-possession, the Debtors have the right, subject to Bankruptcy
Court approval and certain other limitations, to assume or reject executory
contracts and unexpired leases. In this context, "assumption" means that the
Debtors agree to perform their obligations and cure all existing defaults
under the contract or lease, and "rejection" means that the Debtors are
relieved from their obligations to perform further under the contract or
lease, but are subject to a claim for damages for the breach thereof. Any
damages resulting from rejection of executory contracts and unexpired leases
will be treated as general unsecured claims in the Chapter 11 process unless
such claims had been secured on a pre-petition basis. The Bankruptcy Court
has approved the rejection of one executory contract and certain leases, and
the Debtors are in the process of reviewing their remaining executory
contracts and unexpired leases to determine which, if any, they will reject.
The Debtors cannot presently determine or reasonably estimate the ultimate
liability that may result from rejecting contracts or leases or from the
filing of claims for any rejected contracts or leases, and no provisions have
yet been made for these items.

Since the petition date, the Debtors have conducted business in the ordinary
course to the extent permitted by the Bankruptcy Code. The Debtors are in the
process of evaluating their operations as part of the development of a plan
of reorganization. After developing a plan of reorganization, the Debtors
will seek the requisite acceptance of the plan by impaired creditors and
equity holders and confirmation of the plan by the Bankruptcy Court, all in
accordance with the applicable provisions of the Bankruptcy Code.

The accompanying condensed consolidated financial statements are presented in
accordance with American Institute of Certified Public Accountants Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization under
the Bankruptcy Code" ("SOP 90-7"), and have been prepared in accordance with
accounting principles generally accepted in the United States applicable to a
going concern, which principles assume, except as disclosed, that assets will
be realized and liabilities will be discharged in the ordinary course of
business. The Debtors are currently operating as debtors-in-possession under
Chapter 11 of the Bankruptcy Code, and their continuation as a going concern
is contingent upon, among other things, their ability to gain approval of the
plan of reorganization by the requisite parties under the Bankruptcy Code and
have the plan confirmed by the Bankruptcy Court, comply with the DIP
Facility, return to profitability, generate sufficient cash flows from
operations and obtain financing sources to meet future obligations. There can
be no assurance that the Debtors will be able to achieve any of these
results. The accompanying condensed consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might result from the outcome of these uncertainties.

While under the protection of Chapter 11, the Debtors may sell or otherwise
dispose of assets, and liquidate or settle liabilities, for amounts other
than those reflected in the financial statements. In addition, the amounts
10

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

reported on the condensed consolidated balance sheet could materially change
because of various factors, including changes in business strategies and the
effects of any proposed plan or reorganization. In the Chapter 11
proceedings, substantially all unsecured liabilities as of the Petition Date
are subject to compromise or other treatment under a plan of reorganization
which must be confirmed by the Bankruptcy Court after submission to any
required vote by affected parties. Generally, all actions to enforce or
otherwise effect repayment of prepetition liabilities, as well as all pending
litigation against the Debtors, are stayed while the Debtors continue their
business operations as debtors-in-possession. The ultimate amount of and
settlement terms for such liabilities are not presently determinable. Under
SOP 90-7, those liabilities and obligations whose treatment and satisfaction
is dependent on the outcome of the Chapter 11 proceedings have been
segregated and classified as liabilities subject to compromise on the
condensed consolidated balance sheet. The principal categories of
liabilities subject to compromise as of April 3, 2004 are as follows (in
thousands):

12 3/4% senior notes due 2009, net of unamortized
discount and deferred financing costs $ 145,198
Other borrowings and capital lease obligations 6,581
Accrued interest 9,610
Accounts payable 18,983
Accrued expenses and other liabilities 14,345
---------
$ 194,717
=========

Pursuant to SOP 90-7, professional fees associated with the Chapter 11
proceedings are expensed as incurred and reported as reorganization items.
Such expenses totaled $1,751,000 for the first quarter of fiscal 2004. Also
pursuant to SOP 90-7, interest expense is reported only to the extent that it
will be paid during the Chapter 11 proceedings or that it is probable that it
will be an allowed claim. Because the Chapter 11 filings preceded the end of
the Debtors' first quarter of fiscal 2004 by only three days, the difference
between interest reported for the first quarter of fiscal 2004 and interest
that would have been reported in the absence of the Chapter 11 filings was
immaterial.

Assets of Dan River Inc.'s foreign subsidiaries, which are not included in
the bankruptcy proceedings, totaled $9,300,000 as of April 3, 2004, or 2.2%
of total assets included on the accompanying condensed consolidated balance
sheet. Net sales of the foreign subsidiaries were $1,200,000, or 1.0% of
consolidated net sales for the first quarter of fiscal 2004.

11

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements
include the accounts of Dan River Inc. and its wholly-owned
subsidiaries, (collectively, the "Company"). In the opinion of
management, all normal recurring adjustments considered necessary for a
fair presentation of results for the interim periods presented have been
included. Interim results are not necessarily indicative of results for
a full year. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended January 3, 2004.

3. Stock-Based Compensation

The Company's stock-based compensation plans are accounted for based on
the intrinsic value method set forth in APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. Compensa-
tion for restricted stock awards is recognized ratably over the vesting
period, based on the fair value of the stock on the date of grant. No
compensation expense has been recognized relative to stock option
awards, as all options granted under the Company's stock option plans
have an exercise price equal to the market value of the underlying stock
on the date of grant. The following table illustrates the effect on net
income and earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," to stock options granted:

12

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. Inventories

The components of inventory are as follows:

5. Indebtedness

Indebtedness is as follows (in thousands):

Indebtedness not subject to compromise:

13

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Indebtedness subject to compromise:

DIP Financing Facility:

As discussed in Note 1 above, on April 1, 2004, the Bankruptcy Court
approved the $145 million DIP Facility on an interim basis. The DIP
financing order authorized the Debtors to grant first priority
mortgages, security interests, liens, and superpriority claims on
substantially all of the assets of the Debtors to secure the DIP
Facility. The interim financing order, as modified, permits borrowings
of up to $75 million, including $15 million for letters of credit, and
expires on May 28, 2004. The Debtors expect that a final order with
respect to the DIP Facility will be entered by the Bankruptcy Court on
that date.

At the final hearing on the Debtors' motion for DIP financing, the
Debtors sought authority to repay $34.3 million on the term loan which
was outstanding at the Petition Date with proceeds from a $35 million
term loan included in the DIP Facility. Upon the entry of a final DIP
financing order in the form proposed by the Debtors and lenders, the
remaining $35 million in revolving loans, over and above the $75 million
in revolving loans approved by the interim DIP financing order of the
Bankruptcy Court, is expected to become available to the Debtors.
Amounts borrowed under the DIP Facility will bear interest, at the
option of the Debtors, at the rate of the London Interbank Offering Rate
("LIBOR") plus 3.50% (4.60% as of May 19, 2004), or the Alternate Base
Rate plus 2.50% (6.50% as of May 19, 2004), for borrowings under the
revolving credit, and at the rate LIBOR plus 3.75% (4.85% as of May 19,
2004), or the Alternate Base Rate plus 2.75% (6.75% as of May 19, 2004),
for borrowings under the Term Loan. In addition, there is a fee of 0.50%
on the unused commitment and a fee of 3.50% on letters of credit
outstanding. The DIP Facility is secured by substantially all of the
Debtors' assets. The DIP Facility contains financial covenants requiring
the Debtors to maintain minimum levels of earnings before certain
corporate items, interest, taxes, depreciation, and amortization
("Operating EBITDA"), as defined. In addition, the DIP Facility imposes
restrictions relating to, among other things, capital expenditures,
asset sales, incurrence or guarantee of debt, acquisitions, sale of
receivables, certain payments and investments, affiliate and

14

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

subsidiary transactions, payment of dividends and repurchases of stock,
derivatives, and excess cash. The DIP Facility also requires that
proceeds from sales of certain assets be used to repay specified
borrowings and permanently reduce the commitment amount under the
facility. Availability under the revolving credit of the DIP Facility is
based upon a borrowing base determined by reference to eligible accounts
receivable and inventory, as defined. Until the final DIP Facility is
approved, the Debtors must maintain excess availability under the
borrowing base of at least $15 million. At May 19, 2004, there was
$54.5 million outstanding in borrowings at an average interest rate of
5.32% and $5.0 million in letters of credit, with unused capacity of
approximately $28.1 million. Also at May 19, 2004, a total of $15.8
million and $34.3 million, respectively, was outstanding under
prepetition revolving loans and prepetition term loans, at interest
rates of 5.75% and 6.00% respectively.

The DIP Facility requires strict adherence with a weekly cash flow
budget. The Debtors have been unable to maintain compliance with this
budget, and accordingly, the Debtors and the lenders are currently
engaged in discussions regarding appropriate covenants to be included in
the final DIP Facility. There can be no assurance that the Debtors will
be able to reach agreement with the lenders concerning the covenant
requirements to be included in the DIP Facility, or that a final DIP
Facility will be approved on or prior to May 28, 2004, the current
expiration date of the interim facility. In the event the Debtors are
unable to negotiate a satisfactory covenant package with the current
lenders, there can be no assurance that an alternate DIP facility can be
secured and approved in a timely manner. If a DIP financing facility
cannot be maintained, there can be no assurance that the Debtors will
have adequate cash available to continue their operations in the
ordinary course of business to the extent permitted by the Bankruptcy
Code. Moreover, if the lenders do not grant such additional
forbearance, waivers or amendments as may be required with respect to
the DIP Facility, the Debtors will be in default, the Debtors will be
unable to borrow under the facility, and the lenders could seek remedies
against them, including acceleration of the debt outstanding, as set
forth in the DIP Facility.

Prepetition Credit Agreement and Senior Notes:

Prior to the commencement of its Chapter 11 case, the Company maintained
a senior secured credit facility with substantially the same lending
group that is currently providing its DIP financing. The senior secured
credit facility consisted of a five-year $40 million term loan and a
five-year $160 million revolving credit facility. The revolving credit
facility included borrowing availability of up to $25 million for
letters of credit. The Company also had $157 million in senior notes
outstanding. At March 31, 2004, the date of the Company's Chapter 11
filing, outstanding borrowings were $34.3 million under the term loan
and $77.9 million under the revolving credit facility.

The senior secured credit facility was secured by substantially all of
the Company's assets. The Company was required to maintain a minimum
15

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

fixed charge ratio and not to exceed a maximum leverage ratio. The
senior credit facility also imposed restrictions relating to, among
other things, capital expenditures, asset sales, incurrence or guarantee
of debt, acquisitions, sale or discount of receivables, certain payments
and investments, affiliate and subsidiary transactions, payment of
dividends and repurchases of stock, derivatives, and excess cash.

Prior to the end of the third quarter of fiscal 2003, the Company
advised its senior secured lenders that it expected to violate the
covenant specifying the maximum leverage ratio at the end of the
quarter. Subsequent to the end of the third fiscal quarter, the Company
entered into an amendment and waiver agreement with the lenders pursuant
to which the lenders permanently waived this covenant violation. The
Company paid an amendment fee in the amount of $250,000. The amendment
and waiver agreement also contained, among other provisions, new
requirements specifying minimum levels of excess availability under the
revolving credit facility and monthly operating EBITDA during the fiscal
fourth quarter.

In advance of the end of the fourth quarter of fiscal 2003, the Company
again advised its senior secured lenders that it expected to violate the
covenant specifying the maximum leverage ratio and fixed coverage charge
ratio at the end of the quarter. Prior to the end of the fourth quarter,
the Company entered into an amendment and waiver agreement with the
lenders pursuant to which the lenders permanently waived these covenant
violations. The amendment and waiver agreement also contained, among
other provisions, additional liquidity and cash flow projection
reporting, further limitations on capital expenditures through the first
fiscal quarter of 2004 and monthly operating EBITDA, as defined,
covenants for the first fiscal quarter of 2004. The Company paid an
amendment fee in the amount of $350,000.

At the request of the Company early in the first quarter of fiscal 2004,
the senior secured lenders temporarily modified the minimum levels of
excess availability permitted by the credit facility in order to
accommodate anticipated seasonal borrowing needs. There was no fee paid
to the senior secured lenders for this amendment. The senior secured
lenders refused to waive an additional default occurring on March 31,
2004, necessitating the Debtors' Chapter 11 filing.

6. Other Operating Costs, Net

Other operating costs, net for the first quarter of fiscal 2003 consists
of a $440,000 pre-tax gain from the sale of surplus equipment in
connection with the plant consolidation program announced by the Company
in December 2001.

In the second, third and fourth quarters of fiscal 2003 the Company
recorded $23,368,000 in pre-tax charges relating to plant closures and
staff reductions, all of which resulted from actions taken by the
Company to reduce manufacturing capacity and fixed costs in light of
declines in sales volume. The pre-tax charges consisted of $19,148,000
in non-cash writedowns of fixed assets and $4,220,000 in other exit
costs, primarily for severance and benefits.

16

Following is a summary of the reserve account activity relating to exit
costs for the first quarter of fiscal 2004 (in thousands):

Balance at January 3, 2004 $2,283
Expenditures (615)
------
Balance at April 3, 2004 $1,668
======

7. Income Taxes

No income tax benefits were recorded against the pre-tax loss for first
quarter of fiscal 2004. Potential future tax benefits associated with
the pre-tax loss were fully offset by an $8,200,000 increase to the
valuation allowance against deferred tax assets. At April 3, 2004 the
Company's net deferred tax assets were fully offset by the valuation
allowance. The valuation allowance is necessary because, in light of
recent net operating losses incurred and other available evidence,
management does not believe that it is more likely than not that the tax
benefits associated with the deferred tax assets, to the extent they
exceed the deferred tax liabilities, will be realized.

8. Pension Plans

The Company sponsors qualified noncontributory defined benefit pension
plans that cover the majority of its full-time employees. In fiscal 2001
the Company adopted nonqualified supplemental retirement plans covering
certain key management employees. These supplemental plans are unfunded
and provide participants with retirement benefits in excess of qualified
plan limitations.

Net periodic benefit cost included the following components:

17

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company contributed $3,811,000 to its pension plans in the first quarter
of fiscal 2004 and, subject to completion of the 2004 actuarial valuation,
estimates that it will contribute an additional $5,000,000 to the plans in
the remainder of the year.

9. Shareholders' Equity

Activity in Shareholders' Equity is as follows:

Accumu-
lated Unearned
Addi- Other Compen- Total
tional Accumu- Compre- sation- Share-
Common Stock Paid-in lated hensive Restricted holders'
Class A Class B Capital Deficit Loss Stock Equity
------- ------- -------- -------- ------- -------- --------
(in thousands)

Balance at
January 3,
2004 $ 204 $ 21 $ 210,090 $(119,340) $(11,197) $ (293) $ 79,485

Comprehensive loss:
Net loss -- -- -- (21,456) -- -- (21,456)
Unrealized gain on
securities -- -- -- -- 44 -- 44
---------
Comprehensive loss (21,412)
---------
Retirement of
common stock -- -- (33) -- -- -- (33)
Restricted stock
awards -- -- 90 -- -- (90) --
Amortization of
unearned compensation-- -- -- -- -- 86 86
Conversion of
shares 5 (5) -- -- -- -- --
------- ------ --------- --------- -------- ------- --------
Balance at
April 3, 2004 $ 209 $ 16 $ 210,147 $(140,796) $(11,153)$ (297) $ 58,126
======= ====== ========= ========= ======== ======== =========

18

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10. Earnings Per Share

The following table sets forth the computation of basic and diluted
earnings per share:

The effect of potentially dilutive securities is computed using the
treasury stock method. Because the Company reported a loss in the first
quarter of fiscal 2004, all outstanding restricted stock and stock
options were excluded from the computation of diluted loss per share, as
their inclusion would have been antidilutive. Options to purchase
1,991,000 shares of the Company's common stock were outstanding during
the first quarter of fiscal 2003 but were not included in the
computation of diluted earnings per share because their exercise prices
were greater than the average market price of the common stock during
the period.

19

DAN RIVER INC.
(DEBTORS-IN-POSSESSION AS OF MARCH 31, 2004)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11. Segment Information

Summarized information by reportable segment is shown in the following
tables:

20

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.

CHAPTER 11 FILINGS

As more fully described in Note 1 to the condensed consolidated financial
statements, on March 31, 2004, the Debtors filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the Northern District of Georgia. The Debtors are
currently operating their businesses as debtors-in-possession pursuant to the
Bankruptcy Code. Management is in the process of stabilizing the businesses
of the Debtors and evaluating their operations in connection with the
development of a plan of reorganization. After developing a plan of
reorganization, the Debtors will seek the requisite acceptance of the plan by
creditors, equity holders and third parties and confirmation of the plan by
the Bankruptcy Court, all in accordance with the applicable provisions of the
Bankruptcy Code.

As a result of the filing, our creditors were automatically stayed from
taking certain enforcement actions under their respective agreements with us
unless the stay is lifted by the Bankruptcy Court. In addition, the Debtors
have entered into the DIP facility, which is more fully described below under
"Liquidity and Capital Resources."

During the Chapter 11 process, we may with Bankruptcy Court approval sell
assets and settle liabilities, including for amounts other than those
reflected in our financial statements. As permitted under the Bankruptcy
Code, we have rejected one executory contract and certain leases that are not
necessary for the business going forward, and are in the process of reviewing
our remaining executory contracts and unexpired leases to determine which, if
any, we will reject. We cannot presently estimate the ultimate liability
that may result from rejecting contracts or leases or from the filing of
claims for any rejected contracts or leases, and no provisions have yet been
made for these items. The administrative and reorganization expenses
resulting from the Chapter 11 process will unfavorably affect our results of
operations. Future results of operations may also be affected by other
factors related to the Chapter 11 process.

Our condensed consolidated financial statements are presented in accordance
with American Institute of Certified Public Accountants Statement of Position
90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy
Code" ("SOP 90-7"), and have been prepared in accordance with accounting
principles generally accepted in the United States applicable to a going
concern, which principles assume, except as disclosed, that assets will be
realized and liabilities will be discharged in the ordinary course of
business. The Debtors are currently operating as debtors-in-possession under
Chapter 11 of the Bankruptcy Code, and their continuation as a going concern
is contingent upon, among other things, their ability to gain approval of the
plan of reorganization by the requisite parties under the Bankruptcy Code and
have the plan confirmed by the Bankruptcy Court, comply with the DIP
facility, return to profitability, generate sufficient cash flows from
operations and obtain financing sources to meet future obligations. There can
be no assurance that the Debtors will be able to achieve any of these
results. The condensed consolidated financial statements do not include any
21

adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might
result from the outcome of these uncertainties.

While under the protection of Chapter 11, the Debtors may sell or otherwise
dispose of assets, and liquidate or settle liabilities, for amounts other
than those reflected in the financial statements. In addition, the amounts
reported could materially change because of various factors, including
changes in business strategies and the effects of any proposed plan or
reorganization. In the Chapter 11 proceedings, substantially all unsecured
liabilities as of the petition date are subject to compromise or other
treatment under a plan of reorganization which must be confirmed by the
Bankruptcy Court after submission to any required vote by affected parties.
Generally, all actions to enforce or otherwise effect repayment of
prepetition liabilities, as well as all pending litigation against the
Debtors, are stayed while the Debtors continue their business operations as
debtors-in-possession. The ultimate amount of and settlement terms for such
liabilities are not presently determinable. Under SOP 90-7, those
liabilities and obligations whose treatment and satisfaction is dependent on
the outcome of the Chapter 11 proceedings have been segregated and classified
as liabilities subject to compromise on the condensed consolidated balance
sheet. Pursuant to SOP 90-7, professional fees associated with the Chapter 11
proceedings are expensed as incurred and reported as reorganization items.
Interest expense is reported only to the extent that it will be paid during
the Chapter 11 proceedings or that it is probable that it will be an allowed
claim.

RESULTS OF OPERATIONS

NET SALES

Net sales for the first quarter of fiscal 2004 were $121.0 million, a
decrease of $26.3 million or 17.9% from the first quarter of fiscal 2003.

Net sales of home fashions products were $86.6 million for the first quarter
of fiscal 2004, a decrease of $21.9 million or 20.2% from the first quarter
of fiscal 2003. Approximately one half of the decrease is attributable to
lower sales to our largest customer, Kmart Corporation, due principally to
the unfavorable comparison caused by the rollout of a major program in the
first quarter of fiscal 2003. In general, sales were lower in all major
channels of distribution with the exception of the institutional bedding
area, with volume, price and mix all contributing to the decrease.

Net sales of apparel fabrics for the first quarter of fiscal 2004 were $25.7
million, down $3.4 million or 11.6% from the first quarter of fiscal 2003.
Most of the decrease was in sales of dress shirting and uniform fabrics.

Net sales of engineered products for the first quarter of fiscal 2004 were
$8.8 million, a decrease of $1.1 million or 11.1% from the first quarter of
fiscal 2003. The decrease was caused by lower sales of industrial yarns,
reflecting both lower volume and prices.

22

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses were $16.7 million for the first
quarter of fiscal 2004 (13.8% of net sales), a decrease of $1.3 million or
7.0% from $18.0 million (12.2% of net sales) for the first quarter of fiscal
2003. Major contributors to the decrease were lower salary and benefit costs
($0.8 million) attributable to the staff reductions that we announced in
August 2003, and lower incentive compensation accruals ($1.0 million), which
are based on the achievement of operating income targets, offset in part by
higher professional fees for debt-related matters.

OPERATING INCOME

We had a consolidated operating loss of $12.1 million in the first quarter of
fiscal 2004, compared to $10.2 million in operating income for the first
quarter of fiscal 2003.

Segment Operating Income:

The home fashions segment had a $5.3 million operating loss for the first
quarter of fiscal 2004, compared to $11.5 million in operating income for the
first quarter of fiscal 2003. The lower profitability in the first quarter
of fiscal 2004 reflects an $18.5 million reduction in gross profit, offset by
a $1.6 million decrease in selling, general and administrative expenses. Most
of the decrease in gross profit was due to lower unit sales volume and a less
profitable product mix assortment. Generally higher manufacturing costs and
an increase to inventory reserves also contributed to the lower gross profit
in the first quarter of fiscal 2004. The increase to inventory reserves is
attributable to an overall review of our inventory of licensed goods as a
result of the Chapter 11 filing, and to our plans to quickly dispose of slow
moving inventory due to the consolidation of warehouse space.

The apparel fabrics segment had a $4.9 million operating loss for the first
quarter of fiscal 2004, compared to a $0.6 million operating loss for the
first quarter of fiscal 2003. The higher loss in the first quarter of fiscal
2004 reflects a $4.7 reduction in gross profit, offset by a $0.4 million
decrease in selling, general and administrative expenses. The lower gross
profit reflects both the decrease in sales, related higher per-unit costs
associated with underabsorbed overhead, and generally higher manufacturing
costs.

The engineered products segment had a $0.4 million operating loss in the
first quarter of fiscal 2004, compared to a $0.9 million operating loss in
the first fiscal quarter of 2003. Profitability in both periods was hampered
by low sales volume and associated underabsorbtion of fixed overhead. The
modest improvement in profitability for the first quarter of fiscal 2004 was
mostly attributable to improved manufacturing performance which resulted in
the production of less off-quality goods.

Corporate Items:

Other operating costs, net for the first quarter of fiscal 2003 consisted of
a $0.4 million pre-tax gain from the sale of surplus equipment.

23

Other items not allocated to segments, which consist of idle facility costs
and other items not directly related to segment business, totaled $1.4
million (expense) for the first quarter of fiscal 2004 compared to $0.3
million (expense) for the first quarter of fiscal 2003. The increase for
fiscal 2004 was due to $0.7 million in professional fees for debt-related
matters and higher idle facility costs associated with plant closures.

INTEREST EXPENSE

Interest expense was $7.3 million for the first quarter of fiscal 2004, an
increase of $1.8 million from the first quarter of fiscal 2003. The increase
was caused by higher average interest rates in the first quarter of fiscal
2004, which were primarily attributable to the 12-3/4% senior notes that were
issued in connection with our refinancing completed in April 2003. The notes
were issued at a discount and yielded an effective interest rate in excess of
14% in the first quarter of fiscal 2004 on $157 million aggregate principal
amount.

REORGANIZATION ITEMS

In the first quarter of fiscal 2004 we incurred $1.8 million for professional
fees in connection with our bankruptcy filings.

INCOME TAX PROVISION

No income tax benefits were recorded against the pre-tax loss for first
quarter of fiscal 2004. Potential future tax benefits associated with the
pre-tax loss were fully offset by an $8.2 million increase to the valuation
allowance against deferred tax assets. At April 3, 2004 our net deferred tax
assets were fully offset by the valuation allowance. The valuation allowance
is necessary because, in light of recent net operating losses incurred and
other available evidence, management does not believe that it is more likely
than not that the tax benefits associated with the deferred tax assets, to
the extent they exceed the deferred tax liabilities, will be realized.

We recorded a $2.0 million (42.5% of pre-tax income) income tax provision for
the first quarter of fiscal 2003. The relatively high effective rate was due
to losses from our Mexican operations, for which no tax benefit was provided.

NET INCOME AND EARNINGS PER SHARE

We reported a net loss of $21.5 million or $0.97 per diluted share for the
first quarter of fiscal 2004, compared to net income of $2.8 million or $0.12
per diluted share for the first quarter of fiscal 2003.

LIQUIDITY AND CAPITAL RESOURCES

General

Prior to the Petition Date, internally generated cash flow, supplemented by
borrowings under our borrowing base facility, provided for our working

24

capital needs, capital improvements and debt service requirements. With the
filing of our Petition for reorganization on March 31, 2004, our
administrative expenses of the proceedings, working capital needs, and
capital improvements are provided for by cash from operations and the DIP
Facility, discussed below.

Working Capital

Our operations are working capital intensive. Our operating working capital
(accounts receivable and inventories less accounts payable and accrued
expenses) typically increases and decreases in relation to sales and
operating activity levels.

Net cash used by operating activities in the three months ended April 3, 2004
was $5.4 million. The net loss, adjusted for noncash expense items, net, used
$12.8 million of cash. This was offset by a $7.4 million source of cash by
operating assets and liabilities, comprised of a $10.1 million source from
operating working capital (accounts receivable - $11.0 million use,
inventories - $4.0 million source, and accounts payable and accrued expenses
- - $17.2 million source) and a $2.7 million use of cash for prepaid expenses
and other assets and other liabilities.

In the first quarter of fiscal 2003, net cash generated from operating
activities was $7.5 million. The net income for that period, adjusted for
noncash expense items, net, generated $13.9 million of cash. This was offset
by a $6.4 million use of cash by operating assets and liabilities, comprised
of a $5.9 million use of cash from operating working capital (accounts
receivable - $4.2 million use, inventories - $7.8 million use, and accounts
payable and accrued expenses - $6.0 million source) and a $0.4 million use of
cash for prepaid expenses and other assets and other liabilities.

DIP Financing Facility

On April 1, 2004, the Bankruptcy Court approved a $145 million DIP Facility
on an interim basis. The DIP Facility authorized us to grant first priority
mortgages, security interests, liens, and superpriority claims on
substantially all of the assets of the Debtors to secure the DIP Facility.
The interim financing order, as modified, permits borrowings of up to $75
million, including $15 million for letters of credit, and expires on May 28,
2004. We expect that a final order with respect to the DIP Facility will be
entered on that date.

At the final hearing on our motion for DIP financing, we sought authority to
repay $34.3 million on the term loan which was outstanding at the Petition
Date with proceeds from a $35 million term loan included in the DIP Facility.
Upon the entry of a final DIP financing order in the form proposed by us and
the lenders, the remaining $35 million in revolving loans, over and above the
$75 million in revolving loans approved by the interim DIP financing order of
the Bankruptcy Court, is expected to become available. Availability under the
DIP Facility is established by a borrowing base determined by reference to
eligible accounts receivable and inventory, as defined. At May 19, 2004,
there was $54.5 million outstanding in borrowings under the interim facility
at an average interest rate of 5.32%, and $5.0 million in letters of credit;
25

we had approximately $28.1 million in unused capacity available under the
interim DIP financing order. Also at May 19, 2004, a total of $15.8 million
and $34.3 million, respectively, was outstanding under prepetition revolving
loans and prepetition term loans, at interest rates of 5.75% and 6.00%,
respectively.

Amounts borrowed under the DIP Facility will bear interest at our option at
the rate of the London Interbank Offering Rate ("LIBOR") plus 3.50% (4.60% as
of May 19, 2004), or the Alternate Base Rate plus 2.50% (6.50% as of May 19,
2004), for borrowings under the revolving credit, and at the rate LIBOR plus
3.75% (4.85% as of May 19, 2004), or the Alternate Base Rate plus 2.75%
(6.75% as of May 19, 2004), for borrowings under the Term Loan. In addition,
there is a fee of 0.50% on the unused commitment and a fee of 3.50% on
letters of credit outstanding.

The DIP Facility contains financial covenants requiring us to maintain
minimum levels of earnings before certain corporate items, interest, taxes,
depreciation, and amortization ("Operating EBITDA"), as defined. In
addition, the DIP Facility imposes restrictions relating to, among other
things, capital expenditures, asset sales, incurrence or guarantee of debt,
acquisitions, sale or of receivables, certain payments and investments,
affiliate and subsidiary transactions, payment of dividends and repurchases
of stock, derivatives, and excess cash. The DIP Facility also requires that
proceeds from sales of certain assets be used to repay specified borrowings
and permanently reduce the commitment amount under the facility. Availability
under the revolving credit of the DIP Facility is based upon a borrowing base
determined by reference to eligible accounts receivable and inventory, as
defined. Until the final DIP Facility is approved, we must maintain excess
availability under the borrowing base of at least $15 million.

The DIP Facility requires strict adherence with a weekly cash flow budget.
We have been unable to maintain compliance with this budget, and accordingly,
we and the lenders are currently engaged in discussions regarding appropriate
covenants to be included in the final DIP Facility. There can be no
assurance that we will be able to reach agreement with the lenders concerning
the covenant requirements to be included in the DIP Facility, or that a final
DIP Facility will be approved on or prior to May 28, 2004, the current
expiration date of the interim facility. In the event we are unable to
negotiate a satisfactory covenant package with the current lenders, there can
be no assurance that an alternate DIP facility can be secured and approved in
a timely manner. If a DIP financing facility cannot be maintained, there can
be no assurance that we will have adequate cash available to continue our
operations in the ordinary course of business. Moreover, if the lenders do
not grant such additional forbearance, waivers or amendments as may be
required with respect to the DIP Facility, we will be in default, we will be
unable to borrow under the facility, and the lenders could seek remedies
against us, including acceleration of the debt outstanding, as set forth in
the DIP Facility.

Prepetition Credit Agreement and Senior Notes

Prior to the commencement of our Chapter 11 case, we maintained a senior
secured credit facility with substantially the same lending group as is
currently providing our DIP financing. The senior secured credit facility
26

consisted of a five-year $40 million term loan and a five-year $160 million
revolving credit facility. The revolving credit facility included borrowing
availability of up to $25 million for letters of credit. We also had $157
million in senior notes outstanding. At March 31, 2004, the date of our
Chapter 11 filing, outstanding borrowings were $34.3 million under the term
loan and $77.9 million under the revolving credit facility.

The senior secured credit facility was secured by substantially all of our
assets. We were required to maintain a minimum fixed charge ratio and not to
exceed a maximum leverage ratio. The senior credit facility also imposed
restrictions relating to, among other things, capital expenditures, asset
sales, incurrence or guarantee of debt, acquisitions, sale or discount of
receivables, certain payments and investments, affiliate and subsidiary
transactions, payment of dividends and repurchases of stock, derivatives, and
excess cash.

Prior to the end of the third quarter of fiscal 2003, we advised our senior
secured lenders that we expected to violate the covenant specifying the
maximum leverage ratio at the end of the quarter. Subsequent to the end of
the third fiscal quarter, we entered into an amendment and waiver agreement
with the lenders pursuant to which the lenders permanently waived this
covenant violation. We paid an amendment fee in the amount of $250,000. The
amendment and waiver agreement also contained, among other provisions, new
requirements specifying minimum levels of excess availability under the
revolving credit facility and monthly operating EBITDA during the fiscal
fourth quarter.

In advance of the end of the fourth quarter of fiscal 2003, we again advised
our senior secured lenders that we expected to violate the covenant
specifying the maximum leverage ratio and fixed coverage charge ratio at the
end of the quarter. Prior to the end of the fourth quarter, we entered into
an amendment and waiver agreement with the lenders pursuant to which the
lenders permanently waived these covenant violations. The amendment and
waiver agreement also contained, among other provisions, additional liquidity
and cash flow projection reporting, further limitations on capital
expenditures through the first fiscal quarter of 2004 and monthly operating
EBITDA, as defined, covenants for the first fiscal quarter of 2004. We paid
an amendment fee in the amount of $350,000.

At our request early in the first quarter of fiscal 2004, the senior secured
lenders temporarily modified the minimum levels of excess availability
permitted by the credit facility in order to accommodate anticipated seasonal
borrowing needs. There was no fee paid to the senior secured lenders for this
amendment. The senior secured lenders refused to waive an additional default
occurring on March 31, 2004, necessitating our Chapter 11 filing.

Investing Activities

During the first three months of fiscal 2004, we purchased $1.1 million in
equipment and manufacturing improvements.

27

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4. Controls and Procedures.

During the 90-day period prior to the filing date of this report, management,
including our chief executive officer and chief financial officer, evaluated
the effectiveness of the design and operation of the company's disclosure
controls and procedures. Based upon, and as of the date of, that evaluation,
our chief executive officer and chief financial officer concluded that the
disclosure controls and procedures were effective, in all material respects,
to ensure that information required to be disclosed in the reports we file
and submit under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported as and when required.

There have been no significant changes in the company's internal controls or
in other factors that could significantly affect internal controls subsequent
to the date the company carried out its evaluation. There were no
significant deficiencies or material weaknesses identified in the evaluation
and, therefore, no corrective actions were taken.

28

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the federal securities laws. Statements that are not
historical facts, including statements about our beliefs and expectations,
are forward-looking statements. Forward-looking statements include statements
generally preceded by, followed by or that include the words "believe,"
"expect," "anticipate," "plan," "estimate" or similar expressions. These
statements include, among others, statements regarding our expected business
outlook, the Chapter 11 process, anticipated financial and operating results,
strategies, contingencies, financing plans, working capital needs, sources of
liquidity, estimated amounts and timing of capital expenditures,
environmental compliance costs and other expenditures, and expected outcomes
of litigation.

Forward-looking statements reflect our current expectations and are not
guarantees of performance. These statements are based on our management's
beliefs and assumptions, which in turn are based on currently available
information. Important assumptions relating to these forward-looking
statements include, among others, assumptions regarding demand for our
products, continued availability of the DIP Facility on an interim basis and
final approval of the facility by the Bankruptcy Court, expected pricing
levels, raw material costs, the timing and cost of planned capital
expenditures, the estimated cost of environmental compliance, expected
outcomes of pending litigation, competitive conditions and general economic
conditions. These assumptions could prove inaccurate. Forward-looking
statements also involve risks and uncertainties, which could cause actual
results to differ materially from those contained in any forward-looking
statement. Many of these factors are beyond our ability to control or
predict. Such factors include, but are not limited to, the factors set forth
in Exhibit 99.1, "Cautionary Statements relating to Forward Looking
Statements," filed with this Annual Report on Form 10-K, and the following:
. general economic and political conditions and the cyclicality of the
textile industry;
. developing and implementing a successful plan of reorganization in the
Chapter 11 process;
. competitive conditions in the textile industry;
. our ability to operate our business under the restrictions imposed by
the Chapter 11 process and in compliance with the limitations in the DIP
Facility;
. our ability to implement manufacturing cost reductions, efficiencies and
other improvements;
. fluctuations in the supply of raw materials or shortages of the supply
of raw materials;
. our ability to maintain or acquire licenses;
29

. our ability to fund our capital expenditure requirements needed to
maintain our competitive position;

. the effect of U.S. governmental policies regarding imports on our
competitiveness;
. our compliance with environmental, health and safety laws and
regulations;
. changes in our relationship with our large customers, including the
ability to maintain relationships with these customers, licensors and other
constituencies, in light of the Chapter 11 process;
. business-related difficulties of our customers, including Kmart
Corporation;
. risks associated with our operations in Mexico;
. our dependence on outside production sources;
. our ability to compete with foreign imports;
. the significant time that will be required by management to structure
and implement a plan of reorganization;
. our reliance on key management personnel, including the effects of the
Chapter 11 process on our ability to attract and retain key management
personnel; and
. our relationship with the union representing some of our employees.

You should not place undue reliance on any forward-looking statements,
which are based on current expectations. Further, forward-looking statements
speak only as of the date they are made, and we undertake no obligation to
update publicly any of them in light of new information or future events.

30

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

On March 31, 2004, we and our domestic subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Northern
District of Georgia (Case Nos. 04-10990 though 04-10993). We are
currently operating our businesses as debtors-in-possession
pursuant to the Bankruptcy Code. As a result of the filing, pre-
petition obligations of the Debtors, including obligations under
debt instruments, generally may not be enforced against the
Debtors, and any actions to collect pre-petition indebtedness are
automatically stayed, unless the stay is lifted by the Bankruptcy
Court. For more information about the filing, see Part I, Item 2.
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."

From time to time, we are a party to litigation arising in the
ordinary course of our business. We are not currently a party to
any litigation that we believe could reasonably be expected to have
a material adverse effect on our results of operations or financial
condition.

Item 3. Defaults Upon Senior Securities.

On March 31, 2004, we filed a petition for reorganization pursuant
to Chapter 11 of the Bankruptcy Code. For a description of the
effects of the Chapter 11 filing on our senior securities see Part
I, Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits.

The Exhibits listed as applicable on the accompanying
Exhibit Index are filed as part of this Quarterly Report.

(b) Reports on Form 8-K.

(i) On January 20, 2004, we filed a Current
Report on Form 8-K concerning a third amendment to our credit
facility.

(ii) On March 31, 2004, we filed a Current
Report on Form 8-K under Item 3 concerning the filing of
voluntary petitions for reorganization under Chapter 11 of the
U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
Northern District of Georgia.

(iii) On April 2, 2004, we filed a Current
Report on Form 8-K under Item 3 concerning the granting by the
Bankruptcy Court interim approval of a new $145 million debtor-
in-possession credit facility and the approval of payment of
certain pre-petition and post-petition obligations.

31

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.

DAN RIVER INC.

Date: May 24, 2004 /s/ Barry F. Shea
-----------------------------------
Barry F. Shea
Executive Vice President-Chief
Financial Officer
(Authorized Signing Officer and
Principal Financial Officer)

32

EXHIBIT INDEX
-------------

Exhibit No. Description of Exhibit
- ----------- ----------------------

3.1 Amended and Restated Articles of Incorporation of Dan River
Inc.(incorporated by reference to Exhibit 3.1 in Amendment No.
1 to Registration Statement on Form S-1 (File No. 333-36479))

3.2 Bylaws of Dan River Inc.(incorporated by reference to
Exhibit 3.2 in Amendment No. 1 to Registration Statement on
Form S-1 (File No. 333-36479))

11 Statement regarding Computation of Earnings per
share (incorporated by reference to Note 10 to the Unaudited
Condensed Consolidated Financial Statements included in this
Quarterly Report on Form 10-Q)

31.1* Certification of the Chief Executive Officer pursuant to
Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934, as amended, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

31.2* Certification of the Chief Financial Officer pursuant to
Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934, as amended, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

32.1* Certificate of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

32.2* Certificate of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

- -----------------
*Filed herewith.